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Picture Courtesy:  DOWNTOEARTH

Context

Brazil, hosting the 30th Conference of Parties (COP30) to the United Nations Framework Convention on Climate Change (UNFCCC) in Belém in November 2025, has proposed the Tropical Forest Forever Facility (TFFF).

What is the Tropical Forest Forever Facility (TFFF)?

It is a global finance mechanism advocating by Brazil to incentivize the conservation of tropical forests.

Unlike project-based initiatives, TFFF aims to provide long-term, sustainable funding by raising $125 billion through an integrated finance model.

It will pay tropical forest countries (TFCs) a fixed amount per hectare of standing forest, adjusted for deforestation and degradation, with at least 20% of funds allocated to indigenous peoples and local communities (IPLCs).

The initiative to complements existing mechanisms like REDD+ and operates through the Tropical Forest Investment Fund (TFIF), which will invest in bonds to generate returns for conservation payments.

Key Features

• Market-based: Combines public funds (e.g., Official Development Assistance) with private capital (e.g., pension funds, sovereign wealth funds).
• Monitored via satellite for canopy cover and deforestation rates.
• Housed under a multilateral development bank (MDB) like the World Bank.
• Avoids fossil fuel investments, focusing on green and sustainable bonds.

Significance of TFFF

Tropical forests are critical for global ecosystems and climate stability:

• Carbon Sinks: They absorb 20% of global CO2 emissions annually. (Source: Mongabay)
• Biodiversity Hotspots: They are home to 40–75% of all species globally, including half of the world's animal and plant species, and two-thirds of all flowering plant species. (Source: Wikipedia).
• Livelihood Providers: Support 1.6 billion people, including 70 million indigenous people (Source: World Wide Fund for Nature).

Yet, tropical forests face severe threats:

• Deforestation Crisis: 10 million hectares of forests are lost annually due to deforestation and about 70 million hectares affected by fires (Source: UN).
• Climate Justice: Developing countries bear the cost of conservation while developed nations benefit from global climate stability.

TFFF addresses this by making conservation financially viable, reducing the economic incentive to clear forests for agriculture or mining.

How is TFFF Different from Existing Forest Finance Mechanisms?

REDD+: Focuses on reducing emissions from deforestation but relies on carbon credits and project-based funding. TFFF avoids carbon credits, emphasizing long-term payments for standing forests.

Amazon Fund: Targets Amazon conservation with grants from developed nations (e.g., Norway, Germany). TFFF is global, market-driven, and aims for permanence.

Who Will Contribute to the TFFF and How?

TFFF’s Tropical Forest Investment Fund (TFIF) will raise funds from:

• Sponsors (20%): High-income countries (per World Bank classification) and philanthropies, providing concessional loans or grants at low interest rates.
• Market Investors (80%): Institutional investors (e.g., pension funds, insurance companies), sovereign wealth funds, and endowments, contributing via debt instruments like bonds.

The capital will be invested in:

• Liquid public assets (e.g., US Treasury bonds).
• Corporate bonds, especially green, blue, or sustainable bonds in ODA-eligible countries.
• Returns from these investments will fund payments to TFCs, adjusted annually by 2% for inflation.

What Does TFFF Mean for India?

India with Forest and Tree cover area of 25.17% of total land area (Source: Forest Survey of India 2023), can benefit from TFFF:

• Western Ghats, Northeast, Andaman-Nicobar: Tropical forests eligible for TFFF payments.
• South-South Cooperation: India can collaborate with Brazil to shape TFFF governance, leveraging its experience with BRICS and G20.
• Lessons from Domestic Policies: Compensatory Afforestation Fund Management and Planning Authority (CAMPA) and Green India Mission offer models for balancing conservation and development.

Way Forward

To succeed, TFFF must:

• Blend Finance Effectively: Combine concessional public funds with private capital to minimize debt burdens on TFCs.
• Empower IPLCs: Establish transparent mechanisms to ensure ≥20% of funds reach indigenous communities.
• Strengthen MRV: Use standardized, inclusive satellite monitoring to avoid penalizing diverse forest ecosystems.
• Mitigate Market Risks: Create a reserve fund to stabilize payments during market volatility.
• Leverage COP30: Brazil must rally Global South support to counter developed nations’ dominance in fund governance.

Conclusion

The Tropical Forest Forever Facility promises inclusive forest conservation but faces risks of market volatility, debt, and equity.

Source: DOWNTOEARTH